Interactive Marketing Spending to Hit $76.6 Billion in 2016

A new report by Forrester Research forecasts that U.S. interactive marketing spending will reach $76.6 billion by 2016, equal to TV spending this year and comprising 35% of all advertising. That's a big jump considering that this year interactive will comprise 19% of all spending, according to Forrester.

Search and display will continue to be the biggest pieces of the interactive spending pie, comprising 44% and 36 %, respectively, in 2016, though search will have lost share from 55% in 2011. Mobile paid advertising and search will experience astronomic growth and are surpassing email and social this year, according to the report.

"This is the first year we saw growth due to interactive tools really gaining legitimacy in the mix," said Forrester analyst Shar VanBoskirk, noting that search, display and email have become well-established lines in marketers' budgets.

The report, "U.S. Interactive Marketing Forecast, 2011 to 2016," projects the overall compound annual growth rate of interactive marketing spending at 17%, but the fastest-growing category is mobile at 38%, set to reach $8.2 billion in 2016. It attributes the surge to a push toward creating more targeted, dynamic mobile ads instead of so much repurposing of online ads; the rise of mobile commerce; and experimentation with new ad formats for tablets.

Search marketing will continue to be the biggest piece of the interactive spending pie -- rising from $18.8 billion to $33.3 billion between 2011 and 2016 -- but will actually lose share of all interactive spending in the same period, falling from 55% to 44%. Ms. VanBoskirk said the rise of biddable display media, the growth of mobile and investment in social networks and alternative search networks such as Facebook, YouTube and ratings and reviews sites such as Yelp will be factors in the drop-off of search's interactive market share.

Investment in display advertising will rise from $10.9 billion in 2011 to $27.6 billion in 2016, driven by greater than 20% compound annual growth rates in rich media, text listings and online video. The rise of biddable display media and improved online ad management tools are cited as key factors.

Email marketing is projected to have a growth rate of 10%, bringing it to $2.5 billion in 2016, but the total spending is kept down because of its low cost of reach 1,000 consumers, or CPM. And widespread adoption of social media will continue, reflected in a projected 26% growth rate, but total spending will reach only $5 billion in 2016 as it's also an inexpensive tool. (The report notes that listening platforms cost $5,000 to $10,000 per month, but a paid search budget can run up to $500,000 to $3 million per month.)

The report also predicts the rise of subsidized hardware from media giants such as Google and Yahoo, which would look to embed ads into the displays of smartphones, tablets and e-readers in return, creating the possibility of enhanced user targeting for advertisers. It also foresees the onset of daily deals fatigue.

"That will create consolidation and thin out the number of daily deal offers that are available," Ms. VanBoskirk said.

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Cotton Delo

Cotton Delo is Advertising Age’s San Francisco bureau chief and covers digital media and technology. She reports on social-media companies like Facebook and Twitter, especially their product roadmap and pursuit of brand dollars. Before coming to Ad Age she was an editor at AOL and had previously worked at Patch, which she joined when it was a stealth-mode startup. She has a B.A. in English from Yale. Follow her on Twitter at @cottondelo.